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Low-wage Workers Are Older and Better Educated than Ever

Low-wage Workers Are Older and Better Educated than Ever

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Relative to any of the most common benchmarks – the cost of living, the wages of the average worker, or average productivity levels – the current federal minimum wage of $7.25 per hour is well below its historical value. These usual reference points, however, understate the true erosion in the minimum wage in recent decades because the average low-wage worker today is both older and much better educated than the average low-wage worker was in the past.
Relative to any of the most common benchmarks – the cost of living, the wages of the average worker, or average productivity levels – the current federal minimum wage of $7.25 per hour is well below its historical value. These usual reference points, however, understate the true erosion in the minimum wage in recent decades because the average low-wage worker today is both older and much better educated than the average low-wage worker was in the past.

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Published by: Center for Economic and Policy Research on Apr 02, 2012
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 Issue Brief

April 2012
*John Schmitt is a Senior Economist and Janelle Jones is a Research Assistant at the Center for Economicand Policy Research, in Washington, D.C.
Low-wage Workers Are Olderand Better Educated than Ever
Relative to any of the most common benchmarks
 – 
the cost of living, the wages of the average worker, or average productivity levels
 – 
the currentfederal minimum wage of $7.25 per hour is well below its historical value.
1
 These usual reference points, however, understate the true erosionin the minimum wage in recent decades because the average low-wage worker today is both older and much better educated than the averagelow-wage worker was in the past. All else equal, older and better-educated workers earn more than youngerand less-educated workers. More education
 – 
a completed high school
degree, an associate’s degree from a two
-
year college, a bachelor’s degree
 from a four-year college, or an advanced degree
 – 
 
all add to a worker’s
skills. An extra year of work also increases skills through a combinationof on-the-job training and accumulated work experience. The labormarket consistently rewards these education- and experience-related skills with higher pay, but the federal minimum wage has not recognized theseimprovements in the skill level of low-wage workers.Even if there had been no change in the cost of living over the last 30years, we would have expected the earnings of low-wage workers to risesimply because low-wage workers today, on average, are older and muchbetter educated than they were in 1979, when wage inequality began torise sharply in the United States.
 Table 1
below summarizes the characteristics of low-wage workers by age and education, where low wages are defined as earning $10.00 perhour or less in 2011 dollars. Between 1979 and 2011, the average age of low-wage workers increased 2.6 years, from 32.3 to 34.9. The rise in theaverage age reflects a big drop in the share of low-wage workers who areteenagers
 – 
from over one-in-four (26.0 percent) in 1979 to less than one-in-eight (12.0 percent) in 2011. Over the same period, the representationof workers in the 25-to-34 and 35-to-64 age ranges both increasedsharply. In 1979, workers 25-to-64 made up almost half (about 48percent) of low-wage workers; by 2011, they were just over 60 percent.(See
Figure 1
.)Meanwhile, the educational attainment of low-wage workers has alsosoared. The share of low-wage workers with less than a high school
Center for Economic andPolicy Research
1611 Connecticut Ave, NWSuite 400Washington, DC 20009tel: 202-293-5380fax: 202-588-1356www.cepr.net
B
 Y 
 J
OHN
S
CHMITT AND
 J
 ANELLE
 J
ONES
*
 
CEPR Low-wage Workers Are Older and Better Educated Than Ever

2
degree fell by half, from roughly 40 percent in 1979 to roughly 20 percent in 2011. At the same time,the share of low-wage workers with a high school degree increased, from 35.4 to 37.0 percent, andthe share with some college education (but not a four-year degree) rose dramatically, from aboutone-in-five (19.5 percent) in 1979 to one-in-three (33.3 percent) in 2011. By 2011, almost one-tenth(9.9 percent) of low-wage workers had a four-year college degree or more, up from 5.7 percent in1979. (See
Figure 2
.)
TABLE 1Characteristics of Low-wage Workers, 1979 and 2011(percent of low-wage workforce)
1979 2011
(a) Age
16-19 26.0 12.020-24 21.1 23.725-34 17.5 22.135-64 30.8 38.165 4.6 4.2
 Average Age (years) 32.3 34.9(b) Education
Less Than High School 39.5 19.8High School 35.4 37.0Some college 19.5 33.3College+ 5.7 9.9
(c) Gender 
Female 64.8 55.0Male 35.2 45.0
(d) Race/Ethnicity
White 77.5 56.9Black 13.4 14.3Latino 6.7 23.2Other 2.4 5.6Asian n.a. 4.5Source: Authors
analysis of CPS ORG. Low-wageworkers defined as earning less than or equal to $10.00per hour in constant 2011 dollars, using CPI-R-US.
 
CEPR Low-wage Workers Are Older and Better Educated Than Ever

3
FIGURE 1Low-wage Workers, By Age Group, 1979 and 2011FIGURE 2Low-wage Workers, By Education, 1979 and 2011
Given these increases in age and education, even if the cost of living had not changed at all between1979 and 2011, we would have expected workers at the bottom to be earning more in 2011 than in1979.
Figure 3
shows the results of an analysis that estimates where the minimum wage would havebeen if it had kept pace with the increases in the age and educational levels of the low-wage workforce.
26.012.021.123.717.522.130.838.14.64.202040608010019792011
   P  e  r  c  e  n  t
6535-6425-3420-2416-19
39.519.835.437.019.533.35.79.9
02040608010019792011
   P  e  r  c  e  n  t
College+Some collegeHigh SchoolLess Than HighSchool

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